In line with its ambitious railroad expansion plans stipulated in Iran's Sixth Five-Year Development Plan (2017-22), the Iranian government is strengthening its cooperation with China.

Two rail-related contracts were signed in Tehran on Wednesday between the companies of the two countries.

The Iranian government has placed expansion of Iran's rail network on top of its agenda to facilitate transportation, preserve hydrocarbon fuels and reduce air pollution.

Iran’s Sixth Five-Year Development Plan (2017-22) has tasked the government with increasing the share of rail in cargo and passenger transportation to a minimum of 30% and 20% respectively by the end of the plan.

$790m EPCF Rail Contract

A contract was signed between Iran’s Construction and Development of Transportation Infrastructures Company and China Machinery Industry Construction Group Inc, also known as Sinoconst, for the construction of Section-1 of the 446-km Shiraz-Bushehr Railroad, which covers 250 km of the whole route.

“This was an engineering, procurement, construction and finance (EPCF) contract worth CNY5 billion ($790 million). Jahanpars Group is the Iranian contractor of the project,” Deputy for Construction and Expansion of Railroads, Ports and Airports of the Construction and Development of Transportation Infrastructures Company affiliated to the Ministry of Roads and Urban Development, Jabbar-Ali Zakeri, told Financial Tribune.

The official said the insurance company guaranteeing the finance will be introduced within the next three months.

Jahanpars Group is a private general contractor specialized in the engineering, procurement, construction and manufacturing of oil, gas and petrochemical industries as well as infrastructure, industrial and building projects.

Zakeri added that as per international regulations, 85% of the investment required to carry out the project will be financed by the Chinese side and

Iran will be responsible for the remaining 15%.

As ratified by the Iranian Parliament, this amount will be provided from the resources of the National Development Fund of Iran.

Section-1 of Shiraz-Bushehr Railroad has 13 kilometers of tunnels and 2,600 bridges along the way. There is need for 17 million cubic meters of excavation and 13 million cubic meters of embankment, which means a great deal of earthwork must be done.

€500m Contract to Produce Rolling Stock

Another contract was signed on Wednesday between the Industrial Development and Renovation Organization of Iran and CRRC Nanjing Puzhen Co., a Chinese railroad rolling stock manufacturer, for the design, procurement, supply, manufacture and delivery of 450 subway wagons for the Iranian cities of Ahvaz, Shiraz and Tabriz.

“The project is worth €500 million and will be financed by the Chinese side. The contract was signed by Naqi Manafi, IDRO’s manager for financial and economic affairs, and Wang Tao, general manager of Puzhen,” Ali Araqchi, the manager of IDRO’s international affairs who negotiated the contract, said.

The official added that a local manufacturer will be selected to carry out the project.

"We are keeping our options open. We want to give all eligible Iranian wagon manufacturing companies a chance,” he said.

Stipulated in the contract, he explained, is that the Chinese company will transfer the technical know-how so there is a need to set up the production line and the infrastructure.

“Puzhen has agreed to invest €25 million for this to come about,” he said.

The project will take 55 months to complete. The wagons currently used in the country are made of carbon steel. Puzhen will be delivering wagons with an aluminum body.

A Major Player

China has been a major player in Iran's rail sector. In July 2017, China signed a contract with Iran to finance the electrification of a 926-km railroad from Tehran to the eastern city of Mashhad in Khorasan Razavi Province with a $1.5 billion loan. A letter of credit for this purpose was opened five months later.

Tehran-Mashhad Railroad is a strand of the New Silk Road–a 3,200-kilometer railroad project that ultimately sees Urumqi, the capital of China's western Xinjiang Province linked to the Iranian capital Tehran, connecting Kazakhstan, Kyrgyzstan, Uzbekistan and Turkmenistan along the way.

From Tehran, the grand project will join Iran’s east-west network leading to Turkey and Eastern Europe. It could also open a way to Europe via a developing rail route from southern Iranian ports to Azerbaijan and Europe.

The electrification of Tehran-Mashhad Railroad will take four years.

The route is already double-tracked and both tracks will be electrified as part of the deal with the Chinese side. This will raise the speed of the line from the current 160 kph to 200 kph, significantly reducing the duration of a trip between the two cities.

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